Product Description

This book, is devoted to the need for stable currency as the essential foundation of a healthy world economy. Describing the various effects of unstable currency on investors, business people, and wage earners, Keynes recommends the implementation of policies that aim at achieving stability of the commodity value of the dollar rather than the gold value. Keynes's brilliant, clear analysis of the world monetary situation at the beginning of the twentieth century, with his many suggestions and his masterful elucidation of economic principles, stands as a vital primer for anyone interested in developing a better understanding of basic economics and its sociopolitical implications.

Product Details

• Amazon Sales Rank: #387551 in Books
• Published on: 2009-01-23
• Original language: English
• Number of items: 1
• Binding: Paperback
• 220 pages

About the Author
John Maynard Keynes (1883-1946) was the most influential economist of the first half of the twentieth century. During both world wars he was an adviser to the British treasury, and his theory of government stimulation of the economy through deficit spending influenced Franklin D. Roosevelt's "New Deal" administration. The mass unemployment caused by the Great Depression inspired his two most famous works, A Treatise on Money, and General Theory of Employment, Interest and Money.

Customer Reviews

Radical: Must-read for anyone interested in economics
This classic is a must-read for anyone interested in economics, for two reasons:

First, for its age, it is strikingly modern. Although economists have picked apart various points Keynes makes, the core ideas of this text remain both solid and influential. In my opinion, the single most important idea contained in this text is the importance of disciplining the currency supply, keeping the currency supply in rough proportion to the extent of the economy. In this regard, the intellectual ideas contained in this book are the underpinning of virtually all modern economies, and this text is the first in which these ideas appear in their modern form.

On the point of smaller details, while some of Keynes' reasoning and analysis has been picked apart, or shown not to hold in a more modern context, there are other aspects of this book that go ignored by many economists and are still valid. Keynes has a healthy dose of skepticism, more so than is typical for modern economists: he talks not only about his idealized world of ideas, but also about the political realities of implementing what would be the "best practice", and how to reach reasonable compromises. In particular, Keynes seems to be acutely aware of the potential for unhealthy accumulation of wealth in the hands of a powerful but not-necessarily-productive minority, a point that seems to be ignored by all but the most radical economists nowadays.

The second reason I think economics students would benefit from studying this book is its radical perspective and philosophy. Rather than accepting things the way they are, Keynes questions fundamental assumptions and looks for new solutions. I think he must be hailed as a genius for coming up with the ideas in this text when we consider that they were both novel, and that they conflicted very strongly with the dominant ideas of his time. This book is a prime example of "outside the box" thinking. Keynes' genius is even more apparent when we realize that he was able to communicate these ideas in such a way that they became actively embraced by others--in a time frame that is quite impressive for ideas so radical. I think current students could be encouraged and inspired by Keynes' persistent drive to question deep assumptions and come up with what he believed to be the best possible system based on what he knew.

I would recommend any student of economics to study this book. It is not particularly long and it can be a quick read if you have an analytical mind, and I can guarantee that you will find it worthwhile! My advice to the more critical readers: keep an open mind...although many of the ideas in this text are out-of-date, you may find that you can learn form the philosophy and approach that Keynes takes. This book's radical spirit can be inspiration for people in all fields to search for creative new solutions, especially for people facing problems that cannot be solved within the framework of established orthodoxy.

Keynes v. The Gold Standard
Only Keynes could have written "A Tract on Monetary Reform." The book combines high theory, sharp polemics, business savvy, and wicked, elegant prose. There's nothing else like it in the literature -- except, possibly, Keynes' own "The Economic Consequences of the Peace." It's hard to believe these two books were written by the same man who wrote "The General Theory" which, whatever its intellectual merits, is a tough read indeed.

The "Tract" was aimed at the deflationists of the 1920s, who wanted to restore the gold standard, even if it meant rolling back the price increases of World War I and throwing the economy into recession. Keynes was writing for the moment. However, his analysis of inflation/deflation remains fresh and relevant today. The book also has the famous "long run" line. It's a good read.

Lacks a clearcut "uncertainty(ambiguity) vs.risk" distinction
Keynes's Tract on Monetary Reform allows the reader to conclude that,while Keynes did distinguish between uncertainty(Ellsberg's ambiguity,measured by his rho index and/or Keynes's weight of the evidence of the A Treatise on Probability,measured by his w index)and risk on p.105,he had not yet formally integrated the role that uncertainty plays in the demand for money(liquidity preference).Keynes talks about risk in international product markets, trading,currency exchange,backward-forward markets,etc.,but it is clear that he is talking about the various spreads that incorporate risk premiums.Considerations of risk alone lead to the transactions demand for money as being the only explanation for holding money balances in the quantity theory of money as understood by classical and neoclassical economists from Hume to M.Friedman and R.Lucas.The standard quantity theory of the demand for money is operationalized by assuming the applicability of a normal probability distribution.Interestingly,not a single neoclassical,moneterist,or rational expectationist economist has ever done a goodness of fit test first to see if the normal distribution is applicable.Keynes,in 1924,implicitly goes along with this approach.The most important portion of Keynes's book is contained on pages 61-69.He presents the standard approach,given by the following formula: n=p(k+rk'),where n equals cash in circulation,p equals the price level(cost of living index),k equals the public's holding of a cash equivalent,k' equals the public's holding of the cash equivalent in the form of bank deposits,r equals the bank deposit's reserve ratio,and rk' equals the amount of bank reserves.The standard classical and neoclassical short run and long run neutrality of money assertion is obtained if,and only if, n increases while(r+rk') remains invariant.The price level variable p will increase by the same amount as n.In the General Theory(1936),Keynes demonstates in chapter 21 that this result,which he accepted in 1923-24, is only a special case that holds under the existence of risk(the normal probability distribution used by Friedman,Lucas,Tobin,etc.)or certainty.Under conditions of Ellsbergian ambiguity or Keynesian uncertainty(or ignorance),the correct,generalized equation of exchange requires that either the rho index or the w index be integrated into the equation of exchange.The generalized Keynesian-Ellsbergian equation of exchange is then written as n=p[(k/w)+r(k'/w')],where w and w' represent the weight of the evidence available to the general public(w) and the weight of the evidence available to the banking industry(w'),respectively.Both w and w' are normalized on the unit interval between 0 and 1,i.e.,w,w'are elements of the set[0,1].Only if both w and w' are equal to 1 does one obtain the results claimed by Friedman and Lucas.This is why Lucas asserts that macroeconomics must be based on a concept of risk represented by the normal probability distribution,as does Friedman,who also asserts that there is no such thing as liquidity preference(only a transactions demand for money).Friedman thus asserts that there is no such thing as ambiguity.Friedman must make such an assertion because he is a lifelong advocate of the Ramsey-De Finetti-Savage subjective probability approach that asserts that it is not possible to incorporate uncertainty(Savage's vagueness)in a decision rule. Friedman's claim that the GT is based on excessive liquidity preference follows from his acceptance of the LJ Savage approach to probability.Unfortunately for Friedman,there is vast empirical evidence to support the existence of decision making under conditions of uncertainty or ambiguity.One can see the progress Keynes made by comparing the Tract with chapter 21 of the GT.Friedman works with the standard equation of exchange,MV=PO.This is misspecified.The correct generalized equation is M(Vw)=PO,where w is the weight of the evidence.Friedman has a special theory based on the assertion that w=1.Only risk considerations determine the demand for money.